The aim of this chapter is to assess the relationship between investment and technological developments, using recent evidence about the development of the so-called ‘New Economy’, the knowledge-based economy that has evolved from innovations in particular from the IT and biotechnology sectors. The analysis will concentrate on computing investment in the USA. The USA has been chosen because of its global economic importance, its role as a leader in technical innovation and because some argue that a substantial proportion of US productivity improvement reflects the diffusion of computing technologies as well as the increasing efficiency of computing in terms of increasing computer speed and memory. An analysis of high-tech investments will illustrate that not only the magnitude but also the quality of the capital stock will affect productivity. The quality of the capital stock should be enhanced as new technological developments diffuse through economies.
KeywordsIncome Expense Volatility Zucker
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